VTB Capital plc v Nutritek International Corp
Piercing the corporate veil cannot be used to make a person who controls a company a party to the company's contract, so that he is liable on it.
Facts
VTB Capital, a bank, lent $225 million to a Russian company, to buy dairy companies from Nutritek. VTB claimed that it had been induced to make the loan by fraudulent misrepresentations about the value of the dairy companies and the relationship between the buyer and the seller, which were both controlled by a Russian businessman, Mr Malofeev. The loan was not repaid. VTB sought to bring a claim for breach of contract against Mr Malofeev and his companies, by piercing the corporate veil, so that they would be treated as parties to the loan agreement.
Legal principle
The Supreme Court held that the corporate veil could not be pierced in this way. Lord Neuberger said that, even if the veil could be pierced in some circumstances, it would not be appropriate to do so to make the controller of a company jointly liable with it on a contract to which he was not a party. That would be an extension of the circumstances in which the veil had been pierced, and it would be contrary to the principle that contracts bind only the parties to them. The question of whether the veil could ever be pierced was left open, and was later considered in Prest v Petrodel.
Related cases on separate legal personality and the corporate veil
- Adams v Cape Industries plc [1990] Ch 433
- Chandler v Cape plc [2012] EWCA Civ 525, [2012] 1 WLR 3111
- Re Darby, ex p Brougham [1911] 1 KB 95
- DHN Food Distributors Ltd v Tower Hamlets London Borough Council [1976] 1 WLR 852
- Gilford Motor Co Ltd v Horne [1933] Ch 935
- Jones v Lipman [1962] 1 WLR 832
- Lee v Lee's Air Farming Ltd [1961] AC 12
- Macaura v Northern Assurance Co Ltd [1925] AC 619
Studying company law? Our tutors help you understand and apply cases like this in essays, problem questions and exams. Request a quote or browse our law notes.
This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
